Bull of the Day: Caterpillar (CAT)

Caterpillar Company Overview

Zacks Rank #1 (Strong Buy) company Caterpillar (CAT), known for its iconic yellow machines, is the largest global construction and mining equipment manufacturer. Given that it serves a gamut of sectors - infrastructure, construction, mining, oil & gas and transportation, the company is considered a bellwether of the global economy.

Since 1925, Caterpillar’s product portfolio has evolved and boasts 20 brands and generated revenues of $67.6 billion in 2025. It has more than 4 million products with an extensive dealer network of 156 dealers spanning 190 countries.

Caterpillar started using telematics in the 1990s and reached its target of 1 million connected assets in 2019. It currently has more than 1.5 million connected assets. The combination of innovation, and cutting-edge technology, coupled with the formidable reputation, set Caterpillar apart from its peers.

Benefitting from the AI Data Center Boom

The artificial intelligence and cloud computing boom has transformed this legacy industrial giant into a crucial "picks and shovels" player for the physical layer of the AI revolution. The defining challenge for hyperscale AI data centers is securing enough electrical power, and connecting a massive campus to the traditional utility grid can take years due to regulatory hurdles, transmission line shortages, and grid capacity constraints. To bypass these delays, data center developers are increasingly choosing to skip the grid entirely or build decentralized, on-site power infrastructure to accelerate their time to market, which has sparked an unprecedented surge in demand for Caterpillar's Energy & Transportation segment. Developers are deploying massive arrays of Caterpillar's natural gas and diesel reciprocating engines, as well as industrial gas turbines through its Solar Turbines subsidiary, to generate electricity directly on-site and provide the continuous, high-output baseload reliability that compute-heavy AI workloads demand.

Record Backlog Provides Future Revenue Visibility

Caterpillar’s backlog rose to a record $63 billion at the end of first-quarter 2026, up 79% year over year, supported by all three primary segments and all-time record order intake. Management raised its full-year 2026 outlook to low double-digit sales compared with the earlier expectation of growth near the upper end of its long-term 5-7% CAGR target. The company also expects services revenue growth for the year. Notably, the company also updated its previously provided long-term target provided at its investor day of CAGR of 5-7% through 2030 to 6-9%. In North America, demand from residential and non-residential construction should support Caterpillar’s construction equipment sales in the long run. U.S. infrastructure investment in roads, bridges, airports and waterways remains an opportunity for Caterpillar given the breadth of its construction portfolio. Increased construction activity will also support demand in EAME and Latin America. Caterpillar plans to increase Construction Industries’ sales to users to 1.25x by 2030, compared to 2024. Meanwhile, Zacks Consensus Estimates suggest double-digit EPS growth through next year.

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Mining Cycle Support and Autonomous Expansion

Miners are bringing radical changes to mining operations to increase productivity, reduce cost and improve frontline safety and are, thus, increasingly relying on autonomous systems. Electric vehicle demand is also boosting demand for commodities. The intensifying global focus on shifting from fossil fuels to zero emissions will require a huge number of commodities, which in turn, will boost demand for Caterpillar’s mining equipment. Also, favorable trends in commodity prices bode well for mining equipment demand. Caterpillar is enhancing its autonomous capabilities and bringing innovative products into the markets to capitalize on this demand. Caterpillar acquired RPMGlobal in February 2026, expanding its portfolio of data-driven mining technology and software solutions that help customers plan, operate and manage their sites more efficiently. This aligns with the company’s broader autonomy roadmap. The company plans to triple the number of autonomous trucks in Resource Industries from 2025 levels by 2030.

Bullish Technical Set Up

CAT shares are retreating to the rising 50-day moving average, offering a high probability reward-to-risk zone.

Image Source: TradingView

Bottom Line

Caterpillar is exceptionally positioned for sustained long-term growth as a global economic bellwether.

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This article originally published on Zacks Investment Research (zacks.com).

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